The Risks of Privatized Long Term Care

The U.S. is the only other country that has outsourced as much of its publicly supported LTC system as the U.K. has. Private health insurance companies now administer many state Medicaid LTC programs through managed care organizations and investment firms, mainly private equity companies, now own very substantial portions of the nursing home industry. As these articles indicate the British system of outsourced services for the elderly is unraveling, putting both the frail elderly and the British taxpayer at increasing risk of lost services and wasted public resources. This should be a warning to policy makers and advocates in the U.S. that in the absence of adequate oversight and accountability this same disaster could unfold in the U.S. with taxpayers paying more for privatized services and the frail elderly encountering reduced access to care and poorer quality of care.

The residents of the Millbrow Care Home were already frail with old age and illness when they started losing weight at alarming speed.

The reason: They were being neglected, an investigation revealed. For over a year, they had been deprived of food and drink for hours on end. They were not being given the medication they had been prescribed. There were outbreaks of vomiting and diarrhea, and outdated food in the kitchen. No one was in charge of preventing the spread of infections, and managers rarely made an appearance.

The home in northwestern England, near Liverpool, was run by a private enterprise, Four Seasons Health Care, Britain’s second-largest provider, which in turn was owned by Terra Firma, one of the world’s largest private equity groups.

The idea of care homes for older people being traded like financial instruments might be unpalatable, but it is a reality in today’s adult social care sector. In what has been called the “financialisation” of care, private equity investors have pounced on a £16bn industry, attracted by a steady stream of income in the shape of fees from a growing population of older people.

Some 410,000 older people live in care homes in the UK, according to official figures, receiving everything from specialist dementia care to less complex nursing and bed and board. Those numbers are set to rise with lengthening life expectancy.

While these changing demographics are attractive to profit-hungry private equity firms, fears are mounting that some have racked up such huge debts to buy into the sector, they could trigger a financial crisis.

Investment in care homes has gone badly awry in the not-too-distant past. When care home provider Southern Cross imploded in 2011, residents of its 750 homes were plunged into a period of uncertainty. Much of the outrage focused on the firm’s former owner, private equity group Blackstone, which walked away with estimated profits of 500m, leaving cash-strapped local authorities to pick up the pieces.